Investments in Partially Owned Entities

3 Months Ended

Mar. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Fifth Avenue and Times Square JV

As of March 31, 2020, we own a 51.5% common interest in a joint venture ("Fifth Avenue and Times Square JV") which owns interests in properties located at 640 Fifth Avenue, 655 Fifth Avenue, 666 Fifth Avenue, 689 Fifth Avenue, 697-703 Fifth Avenue, 1535 Broadway and 1540 Broadway (collectively, the "Properties"). The remaining 48.5% common interest in the joint venture is owned by a group of institutional investors (the "Investors"). Our 51.5% common interest in the joint venture represents an effective 51.0% interest in the Properties. The 48.5% common interest in the joint venture owned by the Investors represents an effective 47.2% interest in the Properties.

We also own $1.828 billion of preferred equity interests in certain of the properties. All of the preferred equity has an annual coupon of 4.25% for the first five years, increasing to 4.75% for the next five years and thereafter at a formulaic rate. It can be redeemed under certain conditions on a tax deferred basis.

We provide various services to Fifth Avenue and Times Square JV in accordance with management, development, leasing and other agreements. During the three months ended March 31, 2020, we recognized $1,032,000 of property management fee income which is included in "fee and other income" on our consolidated statements of income.

BMS, our wholly-owned subsidiary, supervises cleaning, security and engineering services at certain of the Properties. During the three months ended March 31, 2020, we recognized $1,025,000 of income for these services which is included in "fee and other income" on our consolidated statements of income.

Below is a summary of the latest available financial information for the Fifth Avenue and Times Square JV, which was entered into on April 18, 2019.



(Amounts in thousands)
Income statement for the three months ended March 31, 2020:
Revenues	$	80,475
Net income	9,978
Net loss attributable to Fifth Avenue and Times Square JV (after allocation to our preferred equity interests)	(9,071		)

Alexander’s, Inc. (“Alexander’s”) (NYSE: ALX)

As of March 31, 2020, we own 1,654,068 Alexander’s common shares, or approximately 32.4% of Alexander’s common equity. We manage, develop and lease Alexander’s properties pursuant to agreements which expire in March of each year and are automatically renewable.

As of March 31, 2020, the market value ("fair value" pursuant to ASC Topic 820, Fair Value Measurements ("ASC 820")) of our investment in Alexander’s, based on Alexander’s March 31, 2020 closing share price of $275.95, was $456,440,000, or $363,673,000 in excess of the carrying amount on our consolidated balance sheet. As of March 31, 2020, the carrying amount of our investment in Alexander’s, excluding amounts owed to us, exceeds our share of the equity in the net assets of Alexander’s by approximately $38,791,000. The majority of this basis difference resulted from the excess of our purchase price for the Alexander’s common stock acquired over the book value of Alexander’s net assets. Substantially all of this basis difference was allocated, based on our estimates of the fair values of Alexander’s assets and liabilities, to real estate (land and buildings). We are amortizing the basis difference related to the buildings into earnings as additional depreciation expense over their estimated useful lives. This depreciation is not material to our share of equity in Alexander’s net income. The basis difference related to the land will be recognized upon disposition of our investment.

8. Investments in Partially Owned Entities - continued

Below is a schedule summarizing our investments in partially owned entities.



(Amounts in thousands)	Percentage Ownership at March 31, 2020	Balance as of
	Percentage Ownership at March 31, 2020	March 31, 2020			December 31, 2019
Investments:
Fifth Avenue and Times Square JV	51.5%	$	3,272,854		$	3,291,231
Partially owned office buildings/land⁽¹⁾	Various	460,885			464,109
Alexander’s	32.4%	92,767			98,543
Other investments⁽²⁾	Various	144,285			145,282
		$	3,970,791		$	3,999,165

Investments in partially owned entities included in other liabilities⁽³⁾:
7 West 34th Street	53.0%	$	(53,951	)	$	(54,004	)
85 Tenth Avenue	49.9%	(7,366		)	(6,186		)
		$	(61,317	)	$	(60,190	)

____________________


(1)	Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, 512 West 22nd Street, 61 Ninth Avenue and others.


(2)	Includes interests in Independence Plaza, Fashion Centre Mall/Washington Tower, Rosslyn Plaza, 50-70 West 93rd Street and others.


(3)	Our negative basis results from distributions in excess of our investment.

Below is a schedule of income from partially owned entities.



(Amounts in thousands)	Percentage Ownership at March 31, 2020	For the Three Months Ended March 31,
	Percentage Ownership at March 31, 2020	2020		2019
Our share of net income:
Fifth Avenue and Times Square JV (see page 25 for details)⁽¹⁾:
Equity in net income	51.5%	$	5,496	$	—
Return on preferred equity, net of our share of the expense		9,166		—
		14,662		—
Alexander's (see page 25 for details):
Equity in net income	32.4%	1,416		5,717
Management, leasing and development fees		1,260		1,057
		2,676		6,774

Partially owned office buildings⁽²⁾	Various	1,322		106

Other investments⁽³⁾	Various	443		440

		$	19,103	$	7,320

____________________


(1)	Entered into on April 18, 2019.


(2)	Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue, 7 West 34th Street, 330 Madison Avenue (sold on July 11, 2019), 512 West 22nd Street, 61 Ninth Avenue, 85 Tenth Avenue and others.

(3)

Includes interests in Independence Plaza, Fashion Centre Mall/Washington Tower, Rosslyn Plaza, 50-70 West 93rd Street, Urban Edge Properties (sold on March 4, 2019), PREIT (accounted for as a marketable security from March 12, 2019 and sold on January 23, 2020) and others.